Archive for January, 2010



18
Jan
10

Readings on health care costs

Much of the wailing and gnashing of teeth over the suddenly-close race in Massachusetts has to do with the possibility that it will further delay, or even derail, the health-care reform package.  The main features of that package, we are told, are the provision of affordable health care outside of employee benefits and a reduction in health-care costs.  I don’t know enough about the bill to say whether or not it’s likely to deliver either (although evidence that the Senate bill gamed its CBO evaluation rather egregiously makes me suspicious on the second point), but in any case we need to know what’s going on now in order to tell whether the Senate bill is going to make it any better.

First of all, we have a link to a paper on employer-based provision of health insurance:

Mr. Frankt Frakt (d’oh!) notes:

A high-level take away is that marrying health insurance to employment introduces a vast amount of variation on who is offered and takes up what. Details of health insurance offers, plans, enrollment, and allocation of premium payment between employer and worker have more to do with firm strategy, the profile of a firm’s workers in several dimensions, and the market for labor than about health.

This is just one reason why I break out in hives every time someone tells me that health insurance “proves the free market doesn’t work”.

The paper itself is Modeling Employer Decisions to Offer Health Insurance by Sherry Glied and Joshua Graff Zivin.  Happily, it’s not gated.  Looks like a good read.

Next, Greg Mankiw points us to an article on the rising costs of health care:

First, the problem:

What afflicts the American health care system (and those of other industrialized nations) is called Baumol’s cost disease. It is named for William J. Baumol, an economist at New York University, who turns 88 next month. And it explains why health care costs will almost certainly continue to rise faster than general inflation, and why Democrats might not want to set expectations too high when it comes to their health care bill.

Then, the supporting theory:

Their point was that some sectors of the economy are burdened by an inexorable rise in labor costs because they tend not to benefit from increased efficiency. As an example, they used a Mozart string quintet composed in 1787: 223 years later, it still requires five musicians and the same amount of time to play.Despite all sorts of technological advances, health care, like the performing arts, suffers from the cost disease. [...] While some industries enjoy sharp increases in productivity (cars can be built faster than ever, retail inventory can be managed better), endeavors like health care are as labor-intensive as ever.

And yet, wages in health care grow to match wage increases in the broader economy. (Imagine trying to pay today’s violinist the same as a counterpart in 1787.)

All of this happens invisibly, but the proof is in the budget ledgers of local, state and federal governments. Cost disease helps explain why low-income Americans can now afford flat-screen televisions that were out of reach a decade ago, but health insurance that was unaffordable in January 2000 remains unaffordable in January 2010.

At the same time, demand for health care never lets up. So while slow sales of video games or clothing can reduce prices, health care prices never ease.

Mankiw also offers a simpler (and complementary) suggestion:

Note that the above graph plots percentages, not absolute figures.  (It could be that, adjusting for inflation, Americans pay more out-of-pocket now than they did in 1960.)  But the point is well-made: it’s likely that one cause of increased health care spending is that more and more of that spending is indirect — out of sight, out of mind.  People probably don’t connect higher taxes (or higher deficits) with increased (government) health care spending, and I’d be shocked if anyone besides Russ Roberts and Don Boudreaux connected raises, bonuses, and new ventures that didn’t happen with increased (employer) health care spending.

18
Jan
10

More matters of Martha’s misdeeds

Regarding yesterday’s rant: Commenter Alice points me to a second post by M. LeBlanc, following up on the first and replying to Radley Balko’s criticism:

The gist of the above post is that LeBlanc doesn’t think the Amirault case is as interesting or as important a strike against Coakley as is Coakley’s opposition to a Massachusetts innocence commission.  She writes:

I think it’s important that we see these actions in a political context, because they illuminate our own responsibility for the actions of prosecutors and judges. I also think it’s important that we see them in the context of systems, rather than just as the morally problematic choices of bad actors.

(Emphasis added.)

So far, so good.  Heck, that sounds like something I wrote about a little while ago, where I argued that processes (corresponding to systems in LeBlanc’s post) are more important than individual outcomes, as processes affect everything they touch.  But here’s where I fall back out of step with LeBlanc:

Nor did I offer her political self-interest as a justification for her actions. I realize that because it came at the end of my explication, it could have seemed like one. Like I was saying “look, she did it for political reasons, so that’s okay.” That couldn’t be further from the case, or further from my intention.

What caught my attention from Balko’s post was, rather, this:

A leftist could make a respectable argument that even though Coakley was grievously out of bounds in the Amirault case the need for her vote on health care reform, filibuster prevention, and other issues is more important than the troubling decisions she made as a prosecutor. A leftist could also plausibly argue that when it comes to actually making criminal justice policy as a senator, Coakley isn’t likely to be any worse than her opponent, and therefore she deserves support because she’s more progressive on everything else.

But LeBlanc isn’t arguing either of those positions. She’s arguing something far more repugnant: She’s conceding that the Amirault case was a travesty of justice, and that Coakley was wrong for her extraordinary efforts to keep Gerald Amirault in prison. But she’s then arguing that Coakley deserves a pass specifically for her actions in the Amirault case, anyway, because all prosecutors do it[...].

(Emphasis, again, added.)

This is where we get back into deep systemic problems.  I’m not arguing that Coakley’s a horrible human being because of what she did to the Amiraults (although that’s probably sufficient).  I’m arguing that Coakley’s a horrible human being — and would make a horrible Senator — because of the pervasive dysfunction with which she led Massachusetts’s prosecutorial corps.  The Amirault clemency protest is one symptom.  So is her refusal to entertain an innocence commission.  So is her prosecution of the Souzas, and her position on forensic evidence in Melendez-Diaz v. Massachusetts, and her non-prosecution of Keith Winfield, and her bizarre aggression against the Aqua Team Hunger Force advertisers.  All of those combined show a systemic failure of justice in Massachusetts.

And LeBlanc, in shrugging off the Amirault protest, justified it thus:

As far as I known, it’s something that’s routinely done by prosecutors everywhere. In Illinois, the only place I’ve practiced, the prosecutors oppose all parole petitions, as far as I know. They oppose the petitions with varying levels of vigor. Their vigor is often directly correlated with how strenuously the victims and families of the victims are opposed to release. I can’t find any information about this, but it’s my guess given the notoriety of the case and the large number of “victims” that there was strong public opposition to Amirault’s release.

“Well, everyone else is doing it.”  Okay, so there’s a systemic failure of justice outside Massachusetts as well.  LeBlanc complains that Coakley is a victim of the system, and shouldn’t be punished for playing by its rules:

People seemed to think that the “everyone’s doing it” argument is morally bankrupt. I don’t. I think, when it comes to politics, we simply have to judge people against their peers.

Which, incidentally, Radley Balko did, when he compared Coakley to Dallas County District Attorney Craig Watkins.

So instead of capriciously blaming individuals for participating in a broken system, whether it’s criminal justice or campaign finance, we should seek to reform the systems to prevent injustice and undue influence from flowering.

Where would we begin “to reform the systems to prevent injustice [...] from flowering”?  Within the system itself: the Executive, the Judiciary, and the Legislative branches of government, including the Senate to which Coakley would like to be elected.  Electing someone who took a proactive interest in making Massachusetts less just to the body which will have to approve any systemic reforms is self-defeating.

But the context that’s really pissing me off in all this is a series of posts by Andrew Sullivan on the systematic torture and murder of inmates at Guantanamo Bay:

Given Coakley’s established record on the dispensation of justice and her cavalier regard for the potential innocence of inmates under her care, I don’t want her anywhere near the Senate when stuff like this is going on.

17
Jan
10

Moral rectitude: you’re doing it wrong

So with a good three-quarters of Memeorandum’s feed dedicated to the Senate race in Massachusetts, and the Chargers’ offense being utterly unwilling to pay attention to things like snap counts and play clocks, I find myself learning a lot more than I expected about the contest between the Coke party’s hard statist (Martha Coakley) and the Pepsi party’s medium-firm statist (Scott Brown).  Massachusetts being what it is, you’d expect this to be an entirely lopsided contest, but apparently Brown is making an awful pest of himself and Coakley is spending her time finding new and exciting ways to fuck up her campaign.

For example, the Coakley campaign tells me that Scott Brown wants to deny emergency medical care to rape victims.  Only, uh, not exactly:

The basis is a provision Brown voted for that would allow religious hospital staffers not to inform victims of the availability of the morning-after pill.

If you’re a politician running against a Republican, and you can nevertheless get Andrew Sullivan to call something you did “truly vile”, you have screwed the pooch in spectacular fashion.  I don’t at all like the provision for which Brown voted — it’s unclear whether emergency contraceptives like the ones in the bill permit fertilization and inhibit implantation; if not, arguing that Plan B and the like are abortifacients* is like claiming that a woman who refuses to sleep with you is killing your baby –but it’s nowhere close to what the Coakley mailer claimed.

Update: According to that heinous den of unreconstructed Repugnican thugs at the Washington Post, Brown voted in favour of the contraception bill after his amendment failed, and further voted to override Mitt Romney’s veto thereof.  But let’s not allow something as trivial as the historical record to get in the way of a good hit piece, eh?

I’ve also learned from the hur-hur-it’s-a-pun-geddit? Blue Mass Group that Scott Brown “thought maybe Obama was born out of wedlock”.  Uh, okay; I’m glad we cleared that one up.  A Pepsi-party politician who had Obama Derangement Syndrome in 2008; stop the fucking presses.

So far we’re batting two for two on obsession with conception.  Let’s check in on the other side of the fence, where the Brown campaign reminds us that Martha Coakley prosecuted recovered-memory Satanic-child-abuse cases with particular zest and verve back when it was the “in” thing to do in the Eighties:

Oh, wait: that’s not the Brown campaign, it’s libertarians Radley Balko and Michael Moynihan.  Well, everyone knows that libertarians are practically Pepsi-party hacks, with all their support for ending the drug war and opening the borders and recognizing the right of same-sex couples to marry and all that.  But really, all these stories show is that while Brown wants to hinder rape victims, Coakley wants to help them.  She wants to help them so much that she’ll throw their families in jail even if they weren’t raped in the first place:

While the Amirault case has received the most coverage, there’s also the case of Ray and Shirley Souza, who were accused of molesting both their children and grandchildren. As with the Amarault case, no credible physical evidence existed of sexual assault—but that didn’t stand in the way of the hyper-ambitious Coakley. “What we have are 6- and 7-year-old female children testifying credibly about incidents in the recent past.” Those credible incidents included being forced to drink a “green potion” before being inappropriately touched, being molested by a giant robot, and Ray Souza putting his head in his granddaughter’s vagina and “wiggling” it around.

The Amiraults and Souzas were railroaded; there lives were ruined. Coakley, always forthright about her political ambitions (in 2004, she announced that she would seek Sen. John Kerry’s seat if he won the presidency), stands by her overzealous prosecutions and defends the convictions.

And when those not-rapists are shown to be, well, not rapists by higher standards and better evaluation of evidence, Coakley stood by her convictions (heh) and kept them in prison:

Despite a parole board’s 5-0 recommendation to grant Gerald Amirault clemency and mounting doubts about the evidence against him, Coakley publicly and aggressively lobbied then-Gov. Jane Swift to deny Amirault relief. Amirault remained in prison.

Wall Street Journal reporter Dorothy Rabinowitz, who won a Pulitzer Prize for her coverage of bogus sex abuse cases, recently told The Boston Globe of the Amirault case, “Martha Coakley was a very, very good soldier who showed she would do anything to preserve this horrendous assault on justice.”

In fact, Coakley is so opposed to rapists — even if they never actually, you know, raped anyone — that she’s done everything in her power to prevent convicted inmates from being released:

Last year, Coakley chose to personally argue her state’s case before the Supreme Court in Melendez-Diaz v. Massachusetts. Despite the recent headlines detailing forensic mishaps, fraudulent testimony and crime lab incompetence, Coakley argued that requiring crime lab technicians to be present at trial for questioning by defense attorneys would place too large a burden on prosecutors. The Supreme Court found otherwise, in a decision that had Justices Clarence Thomas and Antonin Scalia coming down on Coakley’s left.

The Melendez-Diaz case wasn’t an anomaly. Coakley has made her reputation as a law-and-order prosecutor. More troubling, she’s shown a tendency to aggressively push the limits of the law in high-profile cases and an unwillingness to cop to mistakes — be they her own or those of other prosecutors. Coakley’s most recent high-profile case was the “Aqua Teen Hunger Force” hoax, in which she defended Boston authorities’ massive overreaction to harmless light-emitting-diode devices left around the city as a promotional gimmick.

[...]

It’s probably not surprising, then, that as DA in Middlesex County, Coakley opposed efforts to create an innocence commission in Massachusetts, calling the idea “backward-looking instead of forward-looking.” Of course, that’s sort of the point — to find people who have been wrongfully convicted. So far, there have been at least 23 exonerations in Massachusetts, including several in Coakley’s home county.

But hey, if it saves just one child from being raped, it’s worth it, right?  Sure, Coakley was perhaps overzealous in her prosecution of… well, damn near everyone.  But isn’t that better than the alternative?  Better a thousand innocents are put in jail than a single guilty man walks free, amirite?

Um.

Yep, Radley Balko again:

Moreover, Coakley’s also being criticized for failing to bring charges against a man who sexually assaulted his young niece with a curling iron. Coakley’s successor put him away for two life terms. Why would Coakley—so aware of the political pressure to be tough on crime, so protective of her own ambition for higher office, and who carefully cultivated an image for herself as a defender of children—not throw the book at a man accused of raping a toddler with a curling iron?

I dunno, was the case against him based on dubious and discredited forensic methodology?  Was he a pariah in his town, railroaded by public opinion run amuck?  Did he fall down a few too many flights of stairs en route to the courthouse?

I’m just guessing here, but it may have something to do with the fact that Keith Winfield was also a police officer. That suggests a blind allegiance to law enforcement that we should find troubling in a U.S. Senator who will be making and voting on criminal justice policy.

…oh.  Nice.

But the top step on the podium in the “doing it wrong” Olympics goes to M. LeBlanc:

A controversial bronze medal goes to commenter Alice, who looks at Coakley’s prosecutorial record and wonders (among other things; I’m running long and editing aggressively; RTWT for proper context):

But I’m a math person, and my only familiarity with how the law is “supposed” to work is from my instincts and, well, stuff I read on blogs. Is it the DA’s job to always push on the side of the state (i.e. keep people in prison), even when the trial is over and new evidence says they were wrong? That’s kind of fucked up, but I guess I’m more okay with Coakley’s actions if they’re the norm. Kinda.

Oh, grotesque abuse of authority is “kinda” okay if it’s the norm? How can I reply to that without Godwinning myself?

Aha! Female circumcision.  That must be okay in societies where “it’s the norm”, right?  I mean, who are we to tell people that pouring carbolic acid on little girls’ clitorises is wrong, like we have some sort of monopoly on moral judgement?

(Disclaimer: I’m almost certainly voting for Coakley anyway. I just want to feel better about my vote.)

Disclaimer: I’m also a math person, and I don’t have any problem recognizing that keeping innocent people in prison is more than “kind of fucked up”.  Die in a fire.

The silver medal goes to Coakley herself, in a nail-biting decision that came down to the possibility that Coakley knew she was doing the wrong thing, but did it anyway for political gain.  The possibility that Coakley might one day feel remorse leaves open the possibility that her (still mostly hypothetical) morals might prevent her from doing something heinous as a Senator.  Maybe.

This leaves LeBlanc with the gold medal for s/h/its servile and Quislingesque defence of Coakley’s record.  We begin four paragraphs into the blog post proper, with this fascinating assertion:

So, what’s the moral status of advocating that someone who is likely innocent remain in prison? It’s a tough question.

No.  No, it isn’t.  Advocating that someone who is likely innocent remain in prison is morally wrong.  How could one possibly think otherwise?

As far as I known, it’s something that’s routinely done by prosecutors everywhere. In Illinois, the only place I’ve practiced, the prosecutors oppose all parole petitions, as far as I know.

Oh, I see.  “Everyone else is doing it!”  Or at least, everyone in Illinois is doing it.  Yeah, the state where cops fight to remain unaccountable for their actions and State’s Attorneys hassle journalism students for exposing wrongful capital convictions.  What a wonderful standard you set for prosecutorial conduct!

But let’s continue.

I don’t have a major problem with prosecutors who lobby for people to serve more time in prison, whether it’s at the indictment, sentencing, or parole stage. My main concern is with systems that are overly deferential to prosecutors, that disadvantage defendants, and that make it extremely difficult for convicts to make the case for their own parole.

Would this include systems where Attorneys General lobby Governors to specifically overturn unanimous parole board decisions that might maybe make them look bad?  ‘Cause that’s what you’re defending, LeBlanc.

Nevertheless, being a prosecutor who is stalwart when presented with evidence of innocence or prosecutorial misconduct is so common as to be banal.

Banal?  You did that on purpose.  (And again, “everyone else is doing it” is no excuse.)

Which is why I think her lobbying for Amirault’s continued incarceration isn’t, in itself, enough to make her a morally suspect choice for senator.

Sure it is.

So, at the end of a day of political hysteria and mediocre football (dear Cowboys defence: what the fuck were you thinking?), I find myself in the unlikely position of cheering on a Pepsi-party statist candidate who actually appears to have a chance at a Senate seat in Massachusetts.

——

* Which only makes sense under the assumption that life begins at conception… but the ethics of abortion are a whole ‘nother post

15
Jan
10

Further to that bank tax

Greg Mankiw says what I was trying to say, only better and with more examples:

One thing we have learned over the past couple years is that Washington is not going to let large financial institutions fail.  The bailouts of the past will surely lead people to expect bailouts in the future.  Bailouts are a specific type of subsidy–a contingent subsidy, but a subsidy nonetheless.

In the presence of a government subsidy, firms tend to over-expand beyond the point of economic efficiency.  In particular, the expectation of a bailout when things go wrong will lead large financial institutions to grow too much and take on too much risk.

[...]

Alternatively, we can offset the effects of the subsidy with a tax.  If well written, the new tax law would counteract the effects of the implicit subsidies from expected future bailouts.

Will the tax law in fact be so well written?   It certainly won’t be perfect.  But it is possible that it will be better than doing nothing at all, watching the finance industry expand excessively, and waiting for the next financial crisis and taxpayer bailout.

RTWT.  Still based on the assumption that only the “too-big-to-fail” banks that received TARP funds will pay the new tax — or, as Mankiw points out, that the bank tax is a preëmptive effort to offset incentives from future bailouts.  (Will the latter interpretation backfire?  I can see banks treating this as a finance-sector Social Security programme: “We paid the bank tax, so we’ve earned a bailout!”)

“It might be better than doing nothing at all” is about as optimistic a conclusion as I can find.

14
Jan
10

Tidbits on taxation

A few things here, all vaguely on the theme of “if you want less of something, tax it”.

——

First, Felix Salmon discusses the proposed “bank tax”.  I find myself in partial agreement but with significant reservations; this is pretty much what happens every time I read Felix Salmon’s column.

Here’s how it’s described:

[E]ssentially, it’s a 0.15% tax on bank liabilities excluding deposits (which already come with an FDIC fee attached). It would be paid by roughly 50 firms, including GE Capital, and would raise something on the order of $90 billion over 10 years. That’s an average of $180 million per firm per year, which seems eminently affordable to me.US subsidiaries of foreign banks like HSBC and Deutsche Bank will be taxed; it’s unclear whether foreign subsidiaries of US banks will be as well. The aim of the tax is to ensure that the entire TARP fund gets repaid in full — not just the money lent to the banks directly, but also the money lent to the banks indirectly, through the AIG bailout. The tax is not, however, designed to repay the cost of rescuing Fannie and Freddie.

I like the way the tax is structured: it’s simple, and the liabilities-minus-deposits formula naturally puts more of the onus on investment banks than commercial banks.

Well, so far so good.  Felix doesn’t address Coyote’s objection that, if the tax is meant to repay TARP, it should be levied only against banks that participated in TARP*, but other than that it seems pretty moderate as taxes go.  The implementation, so far at least, looks pretty simple and not obviously easy to game.  And if the legislation is actually written to self-destruct — er, “sunset” — when TARP has been repaid, I could actually get behind the concept as sound fiscal planning rather than yet another cash grab.  (That’s a big “if”, but stranger things have happened.)

Now, on to the effects.  If you buy the idea that the TARP bailout recipients will be hardest-hit by this tax, and that it will in fact go away once TARP has been paid off, it might actually mitigate the moral hazard inherent in “too big to fail” and the associated blank-cheque expectation of government backing.  For banks, at least; clearly, it’s sending the opposite message to companies that think of themselves more like General Motors (“Fuck up, and we’ll make the banks bail you out!”).  Felix suggests:

It also encourages banks to fund themselves with equity rather than debt.

I’m not entirely convinced that debt financing was itself the problem; it seems to me that relaxed (to say the least) underwriting and securitization standards, combined with incentives that concentrated debt in the residential housing market, were more to blame for the credit crisis than simply skewed debt-to-equity ratios.  Then again, I know barely more than fuck-all about finance, so don’t bet your house on my opinion.

Then we get this:

Will the fee be passed on to bank customers? Well, it doesn’t apply to deposits, so retail banking customers shouldn’t be affected, but you never know. If they are, at the margin that might be no bad thing, if it encourages bank customers to move their money to small-enough-to-fail banks and credit unions.

Um.  Money is fungible.  Let’s restate the question: what’s stopping banks from raising fees to recoup the tax?  If the answer is “at the margin, some customers will switch to smaller banks”, I submit that most customers won’t, and most large banks will cheerfully hike their rates and surcharges even further.

So it could turn out to be a welcome nod in the direction of actually paying our bills and mitigating too-big-to-fail moral hazard, but I’m not gonna hold my breath.

——

Next we look at the proposed tax on “Cadillac” health insurance.  Coyote explores the incentives that led to (and are now leading away from) gilt-edged employer-sponsored health benefits:

History teaches us that tax policy has a huge effect on behavior.  Witness the fact that so many people rely on their employer for health care.  As we see today, this is a really bad idea, but it was hatched because tax law provided incentives for paying compensation in the form of health insurance premiums, since these are not subject to either income or payroll taxes.

Already, employers are offering employees what are effectively buy-outs of health care — higher pay in return for reduced health care benefits.  For employers, the upside risk on health care costs now outweigh the tax advantages of health insurance as a compensation tool.  Given this trend, what do you think will happen when employees suddenly have the same incentive, to roll back health care coverage to get under whatever bar is set for an insurance package Congress thinks is too rich (hint:  wherever the bar is set, it will be below the health insurance Congress provides itself).  Employers and employees are now going to have a shared incentive to back off on health care benefits in exchange for more cash.

I’m given to understand that those insurance-premium tax incentives are one reason why individual health insurance is so expensive (sorta like business class airplane tickets: they’re targeted at people who’re paying with company funds).  If that incentive goes away for many-benefits coverage, will the price of high-end health insurance come down?  Or will the insurance companies just offer less and less of it?  Either way, planning on the “Cadillac tax” income seems like a remarkably bad idea.

Of course, we should be calling it the “Lexus” insurance plan tax, not the “Cadillac” tax — seems that labour unions have negotiated a two-year tax exemption on their plans, so the folks building Caddys won’t be penalized:

This is of course business as usual.  (It might be heartening to labour advocates that the larger unions wield — and are seen to wield — just as much lobbying clout as the large corporations whose power they’re said to offset.)  It may also be unusually bad timing:

This may backfire.  If you think that the Nebraska deal was unpopular, just wait until the administration announces higher taxes on everyone but its friends in the labor movement.  We may see if the popularity of the health care bill still has room to fall.

The more I think about this, the more I think it’s a huge mistake.  Support for unions is at a record low, and the GM deal has already made people think that the Democrats are doing sweetheart deals for Big Labor with our money.  Republicans will have a field day.

Next question: has the Republican brand disintegrated to the point where even stuff like this can’t help them?  I could be convinced either way.

——

* And a pair of car companies we all know and loathe

13
Jan
10

Mid-week misanthropy, vol. 52

So apparently I haven’t written one of these since October.

——

We begin with this post from Coyote Blog, wherein the myth of passenger rail travel gets skewered once again:

In reaction to Joel Epstein’s giddy obsession with the People’s Republic of China and its massive state-run infrastructure projects, Coyote writes:

Epstein, like [Thomas] Friedman, seems to think that the US is somehow being left behind by China because its government builds much more stuff.  We are “asleep.”  Well, I have a big clue for him.  Most of the great progress in this country was built when the government was asleep.  The railroads, the steel industry, the auto industry, the computer industry  –  all were built by individuals when the government was at best uninvolved and at worst fighting their progress at every step.

Epstein in particular thinks we need to build more trains.  This is exactly the kind of gauzy non-fact-based wishful thinking that makes me extremely pleased that Epstein in fact does not have the dictatorial powers he longs for.   High speed rail is a terrible investment, a black hole for pouring away money, that has little net impact on efficiency or pollution.   But rail is a powerful example because it demonstrates exactly how this bias for high-profile triumphal projects causes people to miss the obvious.

Which is this:  The US rail system, unlike nearly every other system in the world, was built (mostly) by private individuals with private capital.  It is operated privately, and runs without taxpayer subsidies.    And, it is by far the greatest rail system in the world.  It has by far the cheapest rates in the world (1/2 of China’s, 1/8 of Germany’s).  But here is the real key:  it is almost all freight.

(Emphasis in the original.  That first “[Thomas] Friedman” link goes to my comments on the Friedman article with which Epstein seems to be enamoured, and is not in the original.  I’m tricky that way.)

Freight rail, as Coyote explains, is an efficient — and profitable, which if you’ve been keeping score from home means that people like it enough to pay the full cost and more without being compelled to do so — way to move large chunks of stuff.  Passenger rail, on the other hand… not so much:

Most of the energy consumed goes into hauling not the passengers themselves, but the weight of increasingly plush rail cars.  Trains have to be really, really full all the time to make an energy savings for high-speed rail vs. cars or even planes, and they seldom are full.  I had a lovely trip on the high speed rail last summer between London and Paris and back through the Chunnel — especially nice because my son and I had the rail car entirely to ourselves both ways.

I think people like Epstein look at electric passenger high-speed rail and marvel at how clean it all is.  No big clunky internal-combustion engines, no clouds of diesel exhaust or towers of sooty smoke; just the startup whine of beefy transmissions clearly audible over the whisper of electric motors.  It’s all very space-age* and inspiring.

Look how clean that electric power is!

Where did you think electricity came from?  Unicorn farts?

Now take a look at that coal-fired power plant, and consider that better than three quarters of the power produced thereby is spent heating up transformers and power lines.  That high-speed train from Pudong into Shanghai really makes sense now, doesn’t it?

——

Meanwhile, Pat Robertson is still an asshole:

I shit thee not.

The Rev. Pat Robertson, on his CBN broadcast today, offered his own explanation of the earthquake in Haiti:

“Something happened a long time ago in Haiti, and people might not want to talk about it,” he said. “They were under the heel of the French … and they got together and swore a pact to the devil. They said, ‘We will serve you if you’ll get us free from the French.’

“True story. And the devil said, ‘OK, it’s a deal,'” Robertson said. “Ever since, they have been cursed by one thing after another.”

Stay classy, Pat.

——

In other news, Derek Lowe takes it to a pair of tin foil-coiffed hysteria-mongers:

First, Dr. Lowe savages a British health blogger who suggests that teh ebil pharma industry will suppress a paper suggesting that cell phone emissions could have a beneficial effect on Alzheimer’s patients.  See, they want to keep selling you their existing, profitable drugs, which is why they’re sinking millions into research on new Alzheimer’s drugs… uh, wait; that doesn’t make sense, as the good Dr. points out.

Next, he tees off on an excitable German politician who insists that the swine flu scare was a “manufactured epidemic” designed by teh ebil pharma industry to sell more Tamiflu.  Dr. Lowe objects:

The World Health Organization is now fielding questions about whether they oversold the epidemic, but it’s a sure bet that (if it taken off more drastically) they’d be fielding even more about why they weren’t prepared for it. At any rate, if you think that the Monolithic Drug Industry can simultaneously push around the WHO, the CDC, and the public health agencies of every other country in the world, I invite you to think again. If we could do all that, we’d at least be in good enough financial shape that we wouldn’t be laying thousands of people off and doing ridiculous mergers out of desperation.

Commenter “You’re Pfizered” elaborates:

When H1N1 was starting to make itself known, the world was begging pharmaceutical companies to get on the train and save the world. Now we are the producers of a false pandemic to make even more money. Damned if you do, damned if you don’t. It’s not quite as bad as the mythology that we all have the cure for cancer locked in our ELNs, but don’t want to give it out for fear of killing the golden goose….

But never mind the circumstances: prevailing wisdom is that drug companies are villainous cesspools of festering evil, and prevailing wisdom has never been wrong before.  Has it?

——

Finally, well….

James Cameron’s completely immersive spectacle “Avatar” may have been a little too real for some fans who say they have experienced depression and suicidal thoughts after seeing the film because they long to enjoy the beauty of the alien world Pandora.On the fan forum site “Avatar Forums,” a topic thread entitled “Ways to cope with the depression of the dream of Pandora being intangible,” has received more than 1,000 posts from people experiencing depression and fans trying to help them cope. The topic became so popular last month that forum administrator Philippe Baghdassarian had to create a second thread so people could continue to post their confused feelings about the movie.

“Depression and suicidal thoughts.”  Over a science-fiction movie that has the gall to be fictional.

I say we ship these people a 60ct bottle of Valium and a fifth of vodka and get them the fuck out of the gene pool.  I’ll kick in twenty bucks; who’s with me?

——

* Yes, I know that the space age was somewhere between 1960 and 1990, and yes, I did that on purpose

12
Jan
10

Continued destruction of value

A while ago I argued that value isn’t zero-sum — the value of a given product can be more than the sum of its inputs.  Well, it cuts both ways.

Let’s have a thought experiment.  Suppose I approach you with a compelling offer: I’m going to make you the most unique and delectable sandwich ever.  It’ll take months of experimentation, of course, but I have a plan — and can show you a list of potential ingredients ranging from Kobe beef to French truffles to the finest applewood-smoked bacon — and a lot of confidence.  Accepting your stipulation that the final sandwich include bacon (as all good sandwiches ought), I guarantee a sophisticated epicurean experience unlike any you’ve ever tasted.  All you have to do is foot the bill.

Months go by.  I send you itemized receipts for filet mignon, Ahi tuna, fresh asparagus (out of season!), and other more exotic ingredients.  These are accompanied by tasting notes such as “too pungent”, “coppery when paired with beef”, and the occasional “brilliant; compliments dark chocolate exquisitely”.  These communications build in you a mounting frenzy of anticipation.  What form could this ultimate sandwich possibly take?  You sign off on each receipt eagerly as my costs run into the thousands of dollars.

Finally, the presentation: Beaming with pride, I place before you, ensconced between two hearty slabs of rye bread and swaddled in bacon and a tasteful arrangement of arugula, the world’s most expensive shit sandwich.  As you work your way from horror to rage, I explain that I’ve been gorging myself on the fine ingredients you bought me and carefully pairing and combining the resulting feces into what I claim is the masterpiece I’ve set before you.

Then you punch me in the mouth.

What’s the value of this shit sandwich?  Unless you’re an epicurean coprophage, probably negative — I suspect most people would pay to not be served a shit sandwich if they couldn’t otherwise avoid it.  The facts that its ingredients cost thousands of dollars, and that its construction has kept me employed for the better part of a year, are utterly beside the point.  I have, quite flagrantly and thoroughly, destroyed the value of those marvelous ingredients and the value of my time and effort.

Now we pass into the analogy segment of this blog post.  You are the American taxpayer; I am General Motors; and the shit sandwich is GM’s 2010 model-year lineup.  (Automobile enthusiasts might note that the strips of bacon correspond to the Corvette, and the slabs of rye to the Camaro and CTS-V respectively.)

Let’s back up for a bit.  The good news is that, to my surprised delight, the U.S. Treasury is actually making a profit on some of its investments as part of the TARP bailout.  The bad news, of course, is that AIG and GM (and, oh yeah, Chrysler — do we still give a shit about Chrysler?) are losing money far faster than those investments can recoup it:

The Treasury estimated net losses on its $700 billion bailout program at $68.5 billion for the fiscal year ended September 30, 2009.

The December report for the Troubled Asset Relief Program, or TARP, showed that the fiscal 2009 net loss included estimated losses of $30.4 billion for AIG and $30.4 billion for automakers, with $27.1 billion in losses from the Home Affordable Modification Program.

These were much larger than a $15 billion profit registered from the Capital Purchase Program for banks and $4.4 billion in profits from other bank investments, asset guarantee and lending programs.

AIG has to be pretty fucking awful to destroy value as quickly as GM and Chrysler combined.  Still, it’s encouraging to note that if we could somehow sever ourselves from those three corporations, we’d be able to claw back — slowly but surely — some of that $700,000,000,000 figure in the form of honest profit rather than seizing it by the usual force of state.

All of that, however, makes this next bit even more obnoxious:

The LA Times-sourced story begins thus:

WASHINGTON – Obama administration officials and lawmakers are scrambling to find a way to funnel some of the financial industry’s record earnings back to the taxpayers who helped rescue the industry from looming disaster.

MISSION ACCOMPLISHED!  Someone land on a carrier.  The US Treasury earned $19,400,000,000 on its TARP investments; all y’all have to do now is apply that to the deficit and we’re golden.

Something tells me that’s not what the administration has in mind.

The White House is considering a fee on banks and other financial companies as one approach, with revenues earmarked to help recoup any losses from the government’s $700 billion bailout fund, a senior administration official said.

…oh.  That’s special: we’re going to go after the one part of the TARP bailout that’s actually posting a positive return on investment for us.  Brilliant fucking incentive, there.

Er, wait… the proposed fee is only being levied against banks that participated in TARP, isn’t it?

Isn’t it?

Note that there is no attempt here to only charge banks who received bailout money, but all banks will be charged equally.  To each according to his need, from each according to his ability.  This is moral hazard in spades.

Dear Mr. President:

More commentary from Megan McArdle:

So we ought to tax bank profits because . . . GM is losing money just like everyone said it would.

I am all for regulation which prevents banks from taking on too much leverage–or encouraging others to do so by offering stupid loans. I would very much like to find a system of financial regulation which results in a financial structure that isn’t so utterly dominant (and bloated) as it has been for the last two decades.  But I’m failing to see why the banks in particular–or rather the customers of the banks who will enjoy higher fees and lower interest rates–ought to bear the financial cost of the Administration’s ill-advised bailout of the UAW.

So am I.




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